Heritage Expert Analysis on the Ryan–Murray Budget Deal

Representative Paul Ryan (R–WI) and Senator Patty Murray (D–WA) forged a budget deal without even trying to address the key drivers of spending and debt in a meaningful way. Instead, the deal increases spending immediately while delaying deficit reduction until later and trades some spending cuts for more revenue. Below are reactions from Heritage analysts on various provisions included in the deal:

Health care. The health care provisions included in the deal are largely non-controversial. The Medicaid changes improve the conditions for the collection of funding and work to reduce waste, fraud, and abuse. For Medicare, the only real change the deal makes is a continuation of sequestration for an additional two years. It does not include any significant policy changes to improve or reform the Medicare program.

Controlling costs in Medicare through payment reductions rather than introducing market-based reforms is ultimately counter-productive. In addition, these payment reductions will worsen problems of patient access to care that are already baked into the program because of Obamacare. Given the gravity of the financial challenges presented by all of the entitlements, Congress should end the policy of continuing to delay substantive reform.

—Alyene Senger, Research Associate, and Robert E. Moffit, PhD, Senior Fellow, in the Center for Health Policy Studies

Aviation security service fees. The recent release of the budget deal is already causing air sickness. Under Title VI section 601, the proposal calls for an increase in aviation passenger security fees. This fee increase would take the current amount from $2.50 per passenger to $5.60.

Unlike the original fee, this increase is not being used to fund or improve security. Instead, the revenue collected is being proposed to replace automatic spending cuts set to begin in January. The revenue, however, will not be directly distributed to the Transportation Security Administration (TSA); instead it will be deposited annually into a general fund of the Treasury.

This increase is yet another way that the Administration and Congress are using the travel industries as an open pocketbook. In a recent Fox News article, Jean Medina, a spokesperson for Airlines for America, discusses the overuse of federal taxes on passengers: “The U.S. aviation industry and its customers are subject to 17 different federal taxes and fees, which totaled nearly $19 billion in 2012. In FY [fiscal year] 2013, U.S. airlines and passengers paid $2.3 billion in federal taxes and fees to TSA—a 100 percent increase from the amount collected in 2002.”

The deal also includes the U.S.–Mexico Transboundary agreement, which governs how American companies operate with Pemex in the Gulf of Mexico. Such a treaty would establish regulatory certainty, open access to the 72 million barrels of oil and 304 billion cubic feet of natural gas available in the acreage covered by the treaty, and demonstrate that bilateral agreements are much more effective than international treaties like the deeply flawed Law of the Sea Treaty.

Conservation Planning Technical Assistance User Fees. The Natural Resources Conservation Service (NRCS) runs a costly conservation technical assistance program for landowners. According to NRCS, this assistance can even include improving the aesthetic character of land and enhancing recreational opportunities. The cost of this unnecessary program is about $714 million for FY 2014 alone, based on the House FY 2014 agriculture appropriations bill. Landowners, both private and public, are more than capable of managing their land and don’t need federal help to do so. They also shouldn’t receive such assistance at the expense of taxpayers.

Under section 705, NRCS would be authorized to collect up to $150 per conservation plan to cover some of the costs provided to recipients of the technical assistance. As stated above, this technical assistance shouldn’t be provided in the first place. Short of this, though, if these user fees were used to offset the taxpayer funding of technical assistance efforts, rather than to increase discretionary spending, they would be a sound way to lessen the massive burden on taxpayers.

Pension Benefit Guaranty Corporation premium rate increases. The budget deal’s provision to improve the Pension Benefit Guaranty Corporation’s (PBGC) $36 billion deficit is a step in the right direction, but the allocation of increased premiums is misguided.

The budget deal increases both the per-participant premium as well as the variable-rate premium assessed on plans’ unfunded liabilities. Increasing the per-participant premiums forces financially sound pension plans to pay for the financially unsound plans. Since the goal is to both reduce the PBGC deficit and encourage full pension funding, any increase in premiums should be limited to variable-rate premiums, which are based on plans’ unfunded liabilities. Just as a smoker is charged more for health insurance, pension plans with higher unfunded liabilities should be charged more than financially healthy plans.

Additionally, while the budget deal increases the cap on variable-rate premiums, the cap should be eliminated entirely, as it effectively eliminates financial penalties among the most underfunded pensions.

Lays the groundwork for federal preschool. The budget deal includes a “deficit neutral reserve fund” for early childhood education. The fund, which is viewed as an “inconsequential amendment,” is a harbinger of bad policy to come. President Obama wants to spend $75 billion over the next 10 years (with significant additional matching funds from the states) to create a universal government preschool program for every four-year-old child in the country.

Senator Tom Harkin (D–IA) and Representatives George Miller (D–CA) and Richard Hanna (R–NY) have introduced a “proposal aimed at expanding high-quality early childhood education for children from birth to age 5” that closely mirrors the President’s proposal.

Oklahoma taxpayers are familiar with such a government preschool scheme: Their state preschool program (one of the only universal, taxpayer-funded pre-K programs in the country) costs taxpayers roughly $150 million per year. Yet there has been no impact on the reading scores of poor children since the program was implemented in 1998.

And anyone who’s studied the federal Head Start program is also familiar with the shortcomings of distant government preschool programs. According to the Department of Health and Human Services, which administers Head Start, the program has had no impact on participating children’s cognitive abilities, their access to health care, or their parents’ parenting practices.

Public preschool at any level of government increases costs for taxpayers by encouraging more participation in public programs, undermining private providers and thereby reducing American families’ preschool choices. And with three-quarters of four-year-old children already enrolled in some form of preschool, there’s no indication of demand for a new federal program. It would provide no new benefit to low-income families who already have access to subsidized childcare.

Policymakers should question government subsidies for middle- and upper-income families in particular, as evaluations of preschool programs over the years have shown little impact for these populations.

More government preschool is not the answer to helping America’s children succeed.

—Lindsey Burke, Will Skillman Fellow for Education

Defense. Regarding defense, the budget conference proposal represents a step in the right direction for fiscal years 2014 and 2015 by providing some relief from the disproportionate spending cuts to this core constitutional function. However, the legislation still shortchanges defense for the years following fiscal year 2015. This is because it permits expansive growth in domestic spending (both discretionary and entitlement) during that period. This will only serve to increase the pressure the on the defense budget for the longer term.

Conferees could have provided adequate funding for defense by finding savings in the bloated domestic budget instead. Another approach would have been to incorporate the proposal (H.R. 3639) of Representatives Bridenstine (R-OK) and Lamborn (R-CO), which would repeal sequestration for defense for fiscal years 2014 and 2015 in exchange for longer-term restraint on entitlement expenditures. The better alternative would have been to avoid further automatic defense cuts in fiscal year 2014 alone, while retaining the overall spending caps on total federal spending and finding savings in the entitlement programs.

— Baker Spring, F.M. Kirby Research Fellow in National Security Policy in the Douglas and Sarah Allison Center for Foreign Policy Studies

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Romina Boccia focuses on federal spending and the national debt as the deputy director of Thomas A. Roe Institute for Economic Policy Studies and the Grover M. Hermann fellow in federal budgetary affairs at The Heritage Foundation. Read her research.

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